Dec 18 (Reuters) - Chinese government approval for imports of a controversial type of Syngenta AG biotech corn increases the likelihood the seed maker will pay settlements to more than 100 U.S. farmers and exporters suing for damages from grain shipments rejected by Beijing, lawyers said.
They said clearance by China’s Ministry of Agriculture - announced Wednesday by U.S. Agriculture Secretary Tom Vilsack, who cited talks with Chinese Vice Premier Wang Yang - ends uncertainty about Agrisure Viptera corn’s status and could give Syngenta new price references to calculate potential losses from the rejections.
It also raises hopes of increased U.S. exports to the world’s fastest-growing corn market, which could support prices.
China is a crucial market for a historically big U.S. corn crop, and demand from China is important to preventing further declines in corn prices that already are hurting U.S. farm income. China, meanwhile, relies on grain from the U.S. and other exporters to feed its population.
Over the past year, U.S. corn trading with China has ground to a near halt as Beijing rejected more than 1.2 million tonnes of U.S. crops due to co-mingling of the unapproved Viptera variety, known as MIR 162, in shipments.
In response, commodities traders Cargill Inc and Archer Daniels Midland Co and dozens of farmers have sued Syngenta, claiming hundreds of millions of dollars in damages from the rejections.
The approval, four years after the world’s top crop chemicals company and one of the largest seed makers made its application, indicates Beijing is still open to accepting biotech crops despite public concerns over their safety. China last granted import approval for a GMO grain in June 2013.
Nearly 90 percent of corn in the United States, the world’s top grains producer, is now genetically engineered, according to the U.S. Department of Agriculture, as farmers embrace technology that helps kill weeds and fight pests.
Beijing’s approval of MIR 162 gives Syngenta an incentive to settle the lawsuits because an end point to the strain’s unapproved status makes it easier to calculate potential damages, said James Pizzirusso, a lawyer representing corn farmers suing Syngenta.
Syngenta has said the lawsuits over MIR 162 are without merit and that it has not put aside money to cover any potential claims. A spokesman did not immediately respond to a question on Wednesday about the potential for financial settlements.
Farmers claim China’s rejections have pressured corn prices and hurt their profits. They will monitor prices in the months after China approves MIR 162 to see how much the market recovers, said Paul Hanly, who is representing exporter Trans Coastal Supply Company in a lawsuit against Syngenta.
In November, prices of U.S. distillers’ dried grains, a byproduct of making ethanol from corn, climbed partly on expectations China would approve MIR 162 after import restrictions in July halted Chinese orders. The rise in prices proves the lack of Chinese approval has been a drag on the market, said Robert Briscoe, a founder of Trans Coastal.
China’s acceptance of the strain is unlikely to spark a prolonged rally in Syngenta’s stock price because growers are expected to cut back on seed and chemical purchases in the face of declining crop prices following large harvests, analysts said.
The company’s shares dipped on Wednesday after temporarily falling to a six-week low on Tuesday. The stock is down about 18 percent since China began rejecting shipments containing MIR 162 in November 2013. Shares of rival Monsanto Co are up 13 percent over the same period.
Patrick Rafaisz, an analyst at Bank Vontobel AG, expects Syngenta shares to rise if China officially clears MIR 162 in the coming days. He said approval will allow the company to avoid losing seed orders from farmers but will not change the fundamental issue that farm economics are poor.
“It’s a product on the market that is competing against other products,” Rafaisz said of MIR 162 corn. “Don’t expect scores of farmers to switch to Syngenta just because it gets Chinese approval.” (Additional reporting by Caroline Copley in Zurich; Editing by Ken Wills)